The International Organization of Securities Commissions (IOSCO) has unveiled nine policy recommendations aimed at fostering greater consistency in regulatory oversight across jurisdictions, particularly in the realms of cryptocurrency and decentralized finance (DeFi). Released on December 19, these recommendations are part of IOSCO's broader initiative to enhance regulatory practices and ensure effective implementation of basic principles within the rapidly evolving landscape of digital assets.
While the recommendations may not introduce groundbreaking concepts, their significance lies in the detailed treatment given to each principle. The IOSCO is striving to establish a framework that promotes a consistent regulatory approach, emphasizing the need for standardized practices to address the challenges posed by crypto-assets and DeFi platforms.
The report underscores the principle of "same activity, same risk, same regulation/regulatory outcome" when regulating both crypto-asset markets and traditional securities markets. This approach seeks to maintain uniformity in regulatory standards, ensuring that similar activities are subject to comparable regulations and outcomes.
The DeFi recommendations are complementary to an earlier set of guidelines for crypto and digital assets released by IOSCO in November. A notable aspect of Recommendation 2, titled "identify responsible persons," challenges the notion that decentralization absolves entities from regulatory oversight. The report contends that, irrespective of governance structures or levels of decentralization, there are usually identifiable responsible persons who control or significantly influence the offering of products, provision of services, or engagement in activities.
The completion of these recommendations marks a crucial phase for IOSCO, transitioning from formulation to implementation. The organization's focus will shift to monitoring, regulatory capacity building, and providing technical assistance to its members. With over 130 regulatory authorities comprising IOSCO's membership, the recommendations are designed to guide the regulation of 95% of the world's financial markets.
Conclusion
As the cryptocurrency and DeFi spaces continue to evolve, regulatory bodies like IOSCO play a pivotal role in establishing comprehensive frameworks. The newly released policy recommendations signal a commitment to consistency and standardization in regulatory practices, acknowledging the need for adaptive approaches to the diverse challenges posed by these innovative financial instruments. The adoption and implementation of these recommendations by IOSCO members are likely to shape the regulatory landscape for digital assets and DeFi platforms in the coming years.
(DEREK ANDERSEN, COINTELEGRAPH, 2023)